Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

Wednesday, June 23, 2010

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION

I just couldn’t stay away – and I am sure you knew it. GDEs be damned!

Trust me, if you have elderly parents you should make sure all of these things are in order while they are still “competent” – you do not want to wait until there is a “situation” before getting thinking about them.

Kay’s post discusses a Tax Court case involving charitable contributions. A few items of note from the post –

(1) “The Court noted that IRS findings in such cases ‘are presumed correct, and the taxpayer bears the burden of proving error in the Commissioner’s determinations’.

Further, said the Court, ‘Deductions are a matter of legislative grace, and the taxpayer bears the burden of proving he is entitled to the deductions claimed’.

Got that? When it comes to dealing with the IRS, you're presumed guilty. That is, the IRS' position is the one the courts will believe from the get go. It's up to you to convince the tax agency's examiner and/or auditor otherwise.”

(2) “Although the panhandlers might truly need the few bucks you dispense as you wait for the traffic light to turn green, they are not an official charitable group. That means your gift to them -- or any individual, such as the family down the street whose house burned down -- is not an IRS qualified tax deduction.”

(3) “And don't forget to get a proper receipt or have some sort of acceptable substantiation, such as a canceled check or credit card statement that shows all the tax-required details of the gift.”

* The TAX POLICY BLOG’s “Monday Map: Property Taxes on Housing by State” indicates that New Jersey is #2 on the list. Garden Staters pay, on average, 1.74% of the value of their homes in real estate taxes. I would have thought it would be the most expensive state – but it was beaten by Texas with 1.76%. CT is #8, but NY and CA are not even in the top 10.

The taxpayer had very similar circumstances to those of Treasury Secretary Geithner, who got a pass on his tax FU. However, this pass is only available to the politically connected. Joe quotes the Court as saying –

“Regardless of the facts and circumstances relating to the case to which petitioner refers involving U.S. Secretary of the Treasury Timothy Geithner, petitioner is required to establish on the basis of the facts and circumstances that are established by the record in his own case that there was reasonable cause for, and that he acted in good faith with respect to, the underpayment for each of his taxable years 2005 and 2006 that is attributable to his failure to report self-employment tax.”

While I agree with the Court that the facts and circumstances of the specific case must determine the decision – it does not make the fact that Geithner got away with his tax faux pas any less wrong.

* The CCH daily headline e-letter reports “Tax Bill in Limbo”. So the popular “extenders” are still currently unextended.

* Oops - they did it again! Another refundable credit - which means another open call for tax fraud. Bill Perez reports in "Adoption Credit Expanded for 2010" at WILLIAM'S TAX PLANNING BLOG that "The adoption credit is worth a maximum of $13,170 for 2010 and will be a refundable credit".

To quote the anti-war anthem of my youth - when will they ever learn? When will they ever learn?

Before contacting me with questions about how a blog post relates to your specific situation, please be aware that I do not give free tax advice to non-clients by e-mail, comment response, or phone. So don't waste your time and mine.